FRIDAY, March 29, 2024
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Residential property

Residential property

Condo presales lead August rebound

Residential property

Presales came back up a bit in August MoM, backed by more condo launches with accompanying presales; low-rise presales were stable. This brought presales for 8M16 to 53% of the full-year targets of the seven leaders, a small fall of 7% YoY. LH, LPN and QH are likely to miss condo presales targets, but this does not impact revenue recognition. We continue to expect stronger presales HoH in 2H16, giving growth in 2016. The market is shifting from price cutting to product innovation, easing concerns about margin. LH and SPALI are favorites.

Presales edged up in August. Aggregate presales for the top seven developers (AP, LH, LPN, PS, QH, SIRI and SPALI) rose 11% MoM to Bt15.6bn in August, recovering from a 17% MoM drop in July. Presales for the 8M16 are Bt112.9bn, a slip of 7% YoY and 53% of their combined full year targets.  

Condo leads the rise. In line with more new launches, condo presales jumped 29% MoM to Bt7.2bn helped by a better take-up rate than expected at AP’s Rhythm Ekkamai, for SIRI, strong presales at 80% at Mori Ha us

and soft launch of a Thonglor project, and for PS a good take-up rate of 60% at Plum Pinklao.Condo presales were Bt40.3bn in 8M16, still -28% YoY, and 42% of their full year targets. Condo presales for LH, LPN and QH are fairly low against their full year targets and look likely to miss. This is not related to revenue realization. 

Sustainable momentum for low-rise. Low-rise presales were stable at Bt8.4bn in August, -3% YoY and -1% MoM. We saw MoM growth for AP (+13%) and QH (+18%), flat for PS, SIRI and SPALI. Only LH saw presales drop 16% MoM due to lower presales at the high-end Laddawan Rattanathibet and Nantawan Bangna. In 8M16, aggregate presales for low-rise still grew 5% YoY to Bt68.9bn, 59% of their full year targets.

Stronger presales in 3Q16, peak in 4Q16. QTD aggregate presales were Bt29.6bn, accounting for 69% of 2Q16 presales. In September, condo presales will come from AP’s official launch of Rhythm Ekkamai and re-launch of Vittorio, SIRI’s Base Garden Rama 9, and LH’s The Bangkok Thonglor. In 4Q16, backed by large condo launches with sales value of Bt50bn, more than doubled QoQ, we expect presales to jump to the year’s highest. Most of the new supply will come from SIRI (Bt26.8bn), followed by SPALI (Bt11.1bn), AP (Bt6bn) and LPN (Bt5.3bn). Presales will grow by 10-15% in 2016.

Easing off price cuts – and margin pressure. In 1H16, developers used pricing to move stock, but they are now shifting to compete via product innovations in new launches, especially for low-rise. We see this as a positive sign, relaxing margin pressure. The innovations include energy-saving interior design (SMG green glass, 5% better light blocking than general green glass, skylight and solar power units, thicker roof insulation, LED light, ceiling strip eaves) and air flow system, and new housing models for 3-storey TH, 3-storey SDH and duplex house to mitigate the cost push from the steady rise in land cost (10% p.a.) while maintaining usable area and unit price. 

Top picks: LH and SPALI. We like LH and SPALI for their growth outlook this year and next. Their backlogs are higher, meaning better earnings visibility and reduced forecast risk. LH will also book an extraordinary gain of Bt1.4bn from the LHBANK deal in 4Q16.

 

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